BI > NOVEMBER 2001

A Dearth of Long-Term Investing

Beware of Spooky Goblins and Talking Chickens

The sky is falling. History doesn't repeat itself. Bet on the hare for a while, the tortoise is way too boring. Better yet, take your money and run. Come back when you're certain the market has nothing but upside ahead. Warren Buffett no longer has any idea about successful long-term investing. Strategic long-term investing is suddenly dangerous to the health of your portfolio and future well-being?

Huh? When I see features like Worth magazine's September 2001 rendition of "Mr. Buffett, Your Time is Up," making statements similar to those above: I check for (1) a full moon; (2) that I've ferociously overslept and it's now April 1st; (3) that it's a Halloween prank in the tradition of Orson Welles and 'War of the Worlds' has invaded Wall Street; or (4) the possibility that the worst may be behind us. I choose No. 4.

The Ghosts of Congresses Past?

I could hardly believe my eyes. But there it was, plain as day, on my office computer monitor. It had all started with a simple mystery. I had decided to check out a theory.

I went online and found one of those daytrading sites that display real-time stock market index graphs. I chose the one that said "candlesticking" (a form of technical analysis) because it looked pretty cool. Every jiggle to the upside triggered a green candle. Every swoosh and swoon was immediately painted on my screen in the shape of an upside down candlestick, but in this case, displayed in a sinister shade of red. I was ready for my experiment.

I leaned forward and whispered, "Congress." Sure enough, an inverted small red candle emerged.

Intrigued, I shouted the test phrase, "Congress!" Wham. A large red candle erupted and markets were humbled worldwide. The evidence was convincing but I needed a more scientific sample. After all, this reliable reaction could have been related to our legislators. So I whispered, "Senate." Not even a wiggle. "Senate!" A flat line. This seemed pretty conclusive. The markets were focused on the Congress of NAIC variety and didn't seem terribly interested in the Capitol Hill version -- unless, of course, Alan Greenspan had been sighted.

"Congress!" The red candle swelled and nearly shifted off the screen. "Greenspan." A small green candle winked and quickly toggled back and forth between red and green. Hmmm. "Greenspan!!!" The screen went blank and a large question mark materialized. I clicked "Help." The pop-up box explained that I needed to provide either what Mr. Greenspan said or which hand he carried his briefcase in on that particular morning. I thought about calling CNBC to see which briefcase he carried and which hand he used, but decided that my experiment was sufficient.

"October. This is one of the most peculiarly dangerous months to speculate in stocks. The others are: July, January, September, April, November, May, March, June, December, August and February." -- Mark Twain.

October has also been the most frequent time for our NAIC National Congress. The legends of Congress 1987, 1989 and 1998 live. Our members remember Congress venues of yore and the first companies they studied when markets drooped and the shopping opportunities rolled in.

Bashing Buffett?

Four years ago, I chronicled a series of sound bites that ran on CNBC under the banner, "Has Warren lost his touch?" A parade of "visionaries" confirmed that Buffett's Midas touch had been obliterated. CNBC reminded us that Buffett declined the opportunity to appear, and I observed that Mr. Buffett's public appearances are almost as rare as his sell decisions. (For the record, the 4-year annualized total return on Berkshire Hathaway is 12.6 percent, through Sept. 10, 2001. This exceeds the S&P 500 over the same time frame by approximately 8 percent per year.)

Now, an opinion spews in the September Worth feature that "buy-and-hold investing was never as smart as Warren Buffett made it look. It's simplistic thinking, this idea that a small group of high-quality stocks can become a perpetual motion machine of investing. Long-term investing and its inherent flaws are all the more dangerous in today's economic environment."

My thoughts? The sky is not falling. I have a hunch that, much like September 1997, Warren is resting comfortably behind his desk, sipping on a Cherry Coke, and smiling. With bearish sentiment percolating, perhaps today's market is not terribly different after all. Mr. Buffett has delivered virtually unmatched results. The track record is credible and his discipline is seemingly unbreakable. Perhaps we should be fairly comfortable with "tired, old strategies," after all?

We agree with Mr. Twain. Speculation, at any time, is dangerous. Investing, in the sense of a disciplined and strategic approach, never has a bad month.

Mark Robertson is director of online resources and senior contributing editor for BetterInvesting. He serves as a member of BetterInvesting Magazine's Editorial Advisory & Securities Review Committee. Mark can be reached at Robertson_Mark@comcast.net.